Kenneth and Dorothy Hitchen - Page 18

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          respect to the entire amount of the deficiency in each of 1984,             
          1985, and 1987.8                                                            
               With respect to petitioners’ taxable year 1988, section                
          6653(a)(1) would impose an addition to tax equal to 5 percent of            
          the entire amount of an underpayment if any part of the                     
          underpayment is due to negligence or intentional disregard of               
          rules or regulations.  Respondent determined that petitioners are           
          liable for the section 6653(a)(1) addition to tax with respect to           
          the entire amount of the deficiency in 1988.                                
               With respect to petitioners’ taxable year 1989, section                
          6662(a) would impose a 20-percent accuracy-related penalty on the           
          portion of an underpayment attributable to any one of various               
          factors, one of which is “negligence or disregard of rules or               
          regulations”.  Sec. 6662(b)(1).  The section 6662(a) penalty is             
          not imposed on any portion of an underpayment where a taxpayer              
          has “reasonable cause for” and “acted in good faith with respect            
          to” such portion.  Sec. 6664(c)(1).                                         
               Negligence is defined as the “‘lack of due care or failure             
          to do what a reasonable and ordinarily prudent person would do              
          under the circumstances.’”  Neely v. Commissioner, 85 T.C. 934,             
          947 (1985) (quoting Marcello v. Commissioner, 380 F.2d 499, 506             

          8The amount reflected in the notice of deficiency for the                   
          sec. 6653(a)(1)(A) addition to tax in 1987 appears to be                    
          incorrect, in that it exceeds 5 percent of the deficiency in that           
          year.  The correct calculation should be made by the parties                
          pursuant to the Rule 155 computations.                                      

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